Thursday, October 13, 2011

PolitiFlub: The employee contribution to Social Security

A recent PolitiFact fact check used the employer's share of the OASDI (Social Security) payroll tax to help calculate the effective tax rate on a person earning $50,000 per year.

I opined that PolitiFact's calculation was wrong.  And I pointed out that PolitiFact has exercised the rule inconsistently over time.  PolitiFact Bias team member Jeff Dyberg pointed me toward another recent example of PolitiFact's inconsistency:

(clipped from PolitiFact.com)
Herman Cain says every worker pays a 15.3 percent payroll tax.  PolitiFact finds the statement "Mostly False":
Cain said, "Every worker pays 15.3 percent payroll tax." That's not accurate. Workers only pay half that, with the exception of the self-employed, as we mentioned above.
Yet Cain could have used PolitiFact as his source for the 15.3 percent figure.  It's almost exactly what PolitiFact claimed in its fact check of President Obama (blue highlights added):
Payroll taxes fund Social Security and Medicare. In general, payroll taxes hit lower-to-middle-income taxpayers harder than high-income taxpayers, for two reasons. First, workers with low to moderate incomes are more likely than rich taxpayers to make the bulk of their income from salaries and wages, which are subject to the payroll tax, rather than capital gains or other types of investment income, which are not subject to payroll taxes. For the very rich, that pattern is reversed. Second, Social Security tax is levied only on the first $108,600 of one’s salary, meaning that virtually all of the earnings of someone making $50,000 a year is subject to it. That wouldn’t be the case for someone who’s very rich.

We asked two researchers at the Urban Institute-Brookings Institute Tax Policy Center, Roberton Williams and Rachel Johnson, for their advice on how to factor in payroll taxes. They estimated that combining the workers’ share of the payroll tax with the employer’s share -- the usual practice among economists -- would mean an extra 15 percentage points for our hypothetical middle-class worker, and less than 2 additional percentage points for the high-income taxpayer.
 Rejecting the 15 percent figure harmed Herman Cain's "Truth-O-Meter" rating.  Barack Obama and Warren Buffett received a benefit from PolitiFact's acceptance of a 15 percent figure in calculating a worker's effective tax rate on a $50,000 income.

So it's time for another little tally of how PolitiFact's inconsistency pans out in terms of the partisan divide.

Benefit
 Barack Obama (story uses 15 percent figure)
 Warren Buffett (story uses 15.3 percent figure)

Neutral?
 Jeff Merkley (story uses 6.2 percent figure)
 Barack Obama (story uses 6.2 percent figure)
 Kendrick Meek (story relies on Tax Policy Center figures)

Harm
 Herman Cain (story uses 6.2 percent figure)
 Michele Bachmann (story follows CBO in crediting employer's share of tax to the employee)
 Sheldon Whitehouse (15.3 percent would have aided Whitehouse*)


*It's worth noting that Whitehouse received so much assistance from PolitiFact in justifying his claim (ignoring the effect of corporate taxes on tax burdens) that he hardly needed any help from the employer's share of the payroll tax.



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